France: 2018 Finance bill and 2017 amended Finance bills - Company Taxation


The Finance Bill for 2018 (#2017-1837) has been adopted by the French Parliament on 21 December 2017 (published by the French Official Journal on 31 December 2017).

By its decision #2017-758 DC of 28 December 2017, the Constitutional Council did not censor any major provisions.

Reduction of the corporate income tax rate to 25% by 2022 (Article 84)

A progressive decrease of the corporate income tax rate down to 25% in 2022 will operate as follows:

• 2018: a 28% rate will apply to the first EUR 500,000 of net profits for all companies (with the remaining profits subject to the 33.1/3% standard rate);

• 2019: the standard rate will be 31% (but the 28% rate will still be applicable on profits below EUR 500,000);

• the 31% rate will be reduced down to 28% in 2020 (applicable to the entire amount of net taxable profits), 26.5% in 2021 and finally 25% in 2022.

The CIT reduced rate of 15% applicable to the first EUR 38,120 will remain unchanged for SMEs.

Abolition of the 3% contribution on profit distributions (Article 37)

In order for the French law to comply with EU law, the 3% contribution on profit distributions (Article 235 ter ZCA of the FTC) is abolished for dividends paid as from 1 January 2018.

Anti-abuse provision relating to the deductibility of interest expenses for the acquisition of securities (“Carrez” rule) (Article 38)

As from 1st January 2018, any company established in the territory of a Member State or in a state of the European Economic Area which has concluded an administrative assistance agreement with France shall be assimilated to a company established in France for the purpose of applying the "Carrez" mechanism (add-backs of financial expenses when management is established abroad).

A risk of litigation should remain under the non-discrimination clauses according to double tax treaties.

Computation of contribution on added value of companies (CVAE) within groups (Article 15)

Following a decision from the French Constitutional Council regarding the computation of CVAE rate within tax consolidated groups (CC, 19 May 2017, #2017-629 QPC), the new rule states that the applicable rate will be determined based on the total amount of turnover generated by all companies meeting the conditions needed to qualify as part of a tax consolidated group.

This new rule applies for 2018 CVAE.

Decrease of the long-term professional capital gains rate for certain companies (Article 29)

The taxation rate on the professional capital gains of companies subject to individual income tax is reduced from 16% to 12.8% (plus 17.2% of social contributions).

Tax credit for competitiveness and employment (CICE) / tax credit for wages tax (CITS) (Articles 86 and 87)

As from 1 January 2019, the CICE and CITS would be abolished and replaced by a decrease of employers’ social contributions, as follows:

• A 6% decrease will apply for all employees covered by the general social security regime and the regime of agricultural employees on wages 2.5 times below the French regulated minimum wage;

• An additional decrease will apply on French regulated minimum wages.

For the transitional period, the CITS will be maintained in 2018 at its 4% rate, while the CICE rate will be reduced from 7% to 6% for wages paid as of 1 January 2018.

Payroll tax (Article 90)

The maximum wages tax rate (i.e. 20% rate on gross salaries exceeding EUR 152,279) is abolished for salaries paid as of 1 January 2018.

Adjustment of the reduced VAT base rate applicable to composite offers whether or not including the online press (Article 8)

Due to the application of different VAT rates, a special method for the breakdown of the VAT base is introduced for composite service offerings at an inclusive overall price.

This adjustment concerns the composite service offered
• by electronic communication operator: the offers include, in addition to the access to an electronic telecommunication network, Internet and/or television services; online services of press or in digital version ;
• by television operators : the offers include online services of press coupled with television services.

The basis of the reduced rates (television and / or press if applicable) would then be equal to the additional price paid by the customer compared to an identical offer, but not including all or part of these reduced rate services, marketed in comparable conditions.

In the absence of comparable offers, the alternative method would be to apply the reduced rate as appropriate:

1) to the amounts paid, per customer, for the acquisition of the rights to distribute the television services, within the limit, if applicable, of the price at which the television services relating to the same rights are marketed elsewhere by the supplier

2) to the amounts paid, per customer, for the acquisition of these services, net of the costs of provision to the public paid by the press publishers to the service provider, within the limit, if applicable, of the price at which these services are marketed elsewhere by the supplier

These new rules will apply to supply of services for which the VAT taxable event and VAT liability occur as from 1st March 2018.


The amended 2017 Finance Bill (1) (#2017-1640) was definitively adopted by Parliament on 14 November 2017 (published in the Official Journal on 2 December 2017).

It was validated by the Constitutional Council, in its decision #2017-755 DC of 29 November 2017.

Additional and exceptional contribution to corporate income tax (Article 1)

Following the decision of unconstitutionality concerning the 3% contribution on distributed income (Constitutional Council, 6 October 2017 #2017-660 QPC), the State must reimburse companies that have paid this contribution. Two exceptional contributions have been put in place to finance this additional state cost.

Exceptional contribution

Companies subject to corporate income tax with a turnover of more than EUR 1 billion are liable for an exceptional contribution amounting to 15% of their corporate income tax (before tax deductions and credits).

Additional contribution

Companies subject to corporate income tax with a turnover of more than EUR 3 billion are liable for an exceptional contribution of 15% of their corporate income tax (before tax reductions and credits). It is cumulated with the exceptional contribution.

For companies having a turnover of more than EUR 3 billions, the global corporate income tax rate amounts to 44.43%.

These contributions are temporary and will only apply for the financial years ended between 31 December 2017 and 30 December 2018.


The amended 2017 Finance Bill (1) (#2017-1775) was definitively adopted by Parliament on 21 December 2017 (published in the Official Journal on 29 December 2017).

It has been validated by the Constitutional Council, in its decision #2017-759 DC of 28 December 2017.

Modification of the favorable regime for mergers, splits and partial contributions of assets (Article 23)

Following the judgment of the ECJ, 8 March 2017, Euro Park, C-14/16 declaring the French regime related to cross-border mergers contrary to European Union law, a reform of this regime has been introduced.

Cross-border regime (abolition of prior approval)

French companies carrying out a contribution to foreign entities in the form of a merger, a scission or a partial asset contribution do no longer have to seek prior approval from the tax authorities to benefit from the favorable tax regime. They must file a special declaration containing the required information on the transaction simultaneously with the filing of the tax return.

The control of the administration will therefore be carried out a posteriori on the basis of the information provided. The absence of declaration will be punished by a fine of EUR 10,000 but without challenging the favorable tax regime.

Nevertheless, the favorable regime applies under condition that the assets transmitted are booked in a French permanent establishment of the foreign entity.

Subject to the administrative guidelines, this condition should however not apply to the contributions of shares of a French company to a foreign one when the shares are regarded as a complete branch of activity (AN report #432).

Reform of the partial contribution of assets regime

The obligation to hold for 3 years the shares received in exchange of a partial contribution of assets placed under the favorable regime is abolished.

The approval to benefit from the contribution-attribution regime (Article 115-2 of the FTC) is also abolished and replaced by legal conditions.

Reduction of late interest and default interest rate (Article 55)

The default interest rate falls down to 0.20% per month, i.e. 2.4% per year.

Non deductibility of conventional withholding tax (Article 11)

Withholding tax where the tax credit could not be offset will definitely be non-deductible. Withholding taxes, cannot be deducted regardless of the drafting of the tax treaty.

Cost of employee leasing (Article 13)

Companies which provide employees to other companies can deduct personnel expenses relating to such employees from their taxable income even in the absence of a total rebilling of these expenses. This deduction is only possible in the case of an employee lease in accordance with Article L8241-3 of the French Labor Code.

The fraction of the costs not rebilled is regarded as an aid subject to the de minimis amount under the European rule (maximum advantage of EUR200 000 over three years).

Single tax representative for foreign companies (Article 11)

Except certain hypothesis, foreign companies which carry out operations in France will be allowed to appoint a single tax representative in order to accomplish their tax obligations. This measure will come into force on the 1st January 2019.

“Youtube Tax” (article 36)

Those now subjected to this tax are: “all persons who received money from advertisers and sponsors for the broadcasting of advertising and sponsoring messages on online videos platforms.” This wording refers mainly to the directors in advertising and sponsors that were directly referred to in the old drafting.

Furthermore, these persons will be taxed solely on the amounts received from advertisers and sponsors that are not redistributed to the providers of online videos.

Flat tax for network companies (IFER) (Article 49)

An extension of the scope of the IFER to the fibre- optic network will come into force as of 1 January 2019. Furthermore, as of 1 January 2019 the tariff will decrease.